By Derek Ishaque
LTC Industry News
August 02, 2015

OptumRx, Catamaran Acquisition

National budget constraints combined with increasing utilization are catalyzing M&A activity at all points in the value chain of the healthcare industry.  The basics of scale and leverage are powerful catalysts that relate to everyone; from facilities on up to the insurance providers. 

While consolidation amongst the higher points of the supply chain help the larger corporations better compete in a environment characterized by declining margins and stricter regulations – single payor solutions can provide a lot of leverage in negotiations with downstream providers, which could adversely affect LTC facilities, hospitals and pharmacies alike.  This all depends on the directives and growth plans of new leadership and government. 

OptumRx and Cataman are merging, below are some insights as to why….

1.  Its all about Scale

Assuming the acquisition goes through, "scale" is a done deal. UnitedHealth already owns the industry's third-largest PBM with its in-house OptumRx unit. Catamaran, by contrast, is the fourth-largest PBM by volume of prescriptions processed. After the merger, UnitedHealth will be neck-and-neck with CVS Health, which covers 65 million plan members, for No. 2. By comparison, top dog Express Scripts covers 90 million.

2.  Negotiating Drug Prices

In the U.S., prescription drug spending rose more than 12% last year, the biggest annual increase in more than a decade.   In response, PBM will take take a tough stance on drug pricing to hedge margin deprecation. 

3.  Expect a War Against Megapriced Drugs

Specialty drugs now account for 25% of U.S. insurers' total pharmacy spending. But that percentage is expected to double to 50% by 2018.  These are staggering numbers. 

News Release

Author Description

Derek Ishaque

Derek is the Owner and CEO of SCRx Pharmacy. He has previous experience in Investment Banking at Bear Stearns and private equity at Bridgescale Partners. Derek has a B.S. in Finance from USC.

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